Starting a building project is exciting, but it also comes with real questions about what could go wrong before the work is even finished. A fire, a windstorm, or a theft on the job site can turn a smooth project into a financial headache fast.
That’s where builders risk insurance comes in, and it is one of those coverages people often overlook until they wish they had it. At April Jones Insurance, we compare multiple carriers to find the right fit for you, so you are protected from the day the project starts. Get started your quote.
What Is Builders Risk Insurance?
Builders risk insurance is a specialized property policy that helps protect a structure while it is under construction. You might also hear it called course of construction insurance, since it only applies during the building phase.
Think of it as coverage for new construction or a renovation for a building that is not quite a complete building yet. Once the project is finished and ready for its intended use, this type of risk insurance has done its job and homeowners insurance will take it’s place.
A builders risk insurance policy typically covers the structure itself along with materials and supplies waiting to be installed. That coverage follows your construction project through the in-between stage when it is most vulnerable.
What Does Builders Risk Insurance Cover?
A standard builders risk policy is designed to help protect the physical work in progress. The goal is simple, which is keeping your construction budget safe from sudden setbacks.
Covered Property and Common Risks
Most policies protect the building under construction, along with materials, fixtures, and equipment stored at the construction site. Perils insured against will often include fire, wind damage, theft, vandalism, and certain natural disasters, depending on your policy terms. Some policies don’t cover theft, which is one of the major causes of loss. Make sure your policy includes theft.
Many policies also extend to temporary structures like scaffolding or fencing tied to the job. Some even include coverage for materials in transit before they reach the site.
Soft Costs and Extra Expenses
Beyond the bricks and lumber, a good builders risk insurance policy can address soft costs. These are the less obvious expenses that pile up when a covered loss delays your timeline.
Soft costs might include architectural fees, legal fees, additional loan interest, and other costs tied to the delay. Some policies also help with debris removal and cleanup costs after a covered event.
You can often add additional coverage for things like pollutant cleanup, contract penalties from a missed deadline, or losses tied to delayed start up and hot testing. Hot testing refers to operational performance tests of machinery and equipment under actual working conditions using heat, fuel, feedstock, or electrical loads.
Talk with your insurance agent at April Jones Insurance about which add-ons make sense for your construction type.
Do I Need Builders Risk Insurance?
This is the big question, and the honest answer depends on your role and your financial stake in the project. If you have an insurable interest in a structure being built (homeowner or builder), builders risk coverage is worth a serious look.
Who Usually Needs This Coverage
A general contractor, a project owner, and property owners all commonly carry this coverage. Anyone with a financial interest in the completed building has a reason to protect it during construction.
Lenders often require it too. If you are using a construction loan, your lender will likely want a builders risk insurance policy in place before releasing funds.
Your construction contract may also spell out who buys the coverage. Reviewing that construction agreement early helps you avoid coverage gaps and finger pointing later.
Why Your Home Insurance Policy Falls Short
Here is a common misunderstanding worth clearing up. Your homeowners insurance usually will not extend coverage to a major renovation project or new construction.
A standard homeowners policy is built for a finished, occupied home, not an active construction zone. The same goes for a typical property policy on an existing building or office building.
If you are adding on to an existing structure, your homeowners insurance may cover the existing portion while leaving the new work exposed. Builders risk insurance fills that gap so the entire project is accounted for.
How Builders Risk Insurance Works
Understanding a few basics makes the whole thing feel less intimidating. The structure of these policies is fairly straightforward once you see how the pieces fit.
Policy Length and Project Value
Coverage is usually tied to the project value rather than running indefinitely. The amount you insure should reflect the full cost to complete the build.
Most policies last for the expected length of the project, often six to twelve months. Coverage generally ends at policy expiration or when the building is finished, whichever comes first.
If your project runs long, you can usually request an extension. Just loop in your insurance agent before the policy lapses so you avoid any open exposure.
Who Is Listed on the Policy
The named insured is typically the person or company with the largest financial interest in the project. Others with a stake, like a lender or a co-owner, can be added as an additional interest.
This setup keeps everyone with insurable interest protected under one risk insurance policy. It also reduces confusion if a claim ever needs to be filed.
How Much Does Builders Risk Insurance Cost?
Cost is usually the next question once people understand what the coverage does. The honest answer is that it varies, because every project carries its own set of risks.
As a rough guide, builders risk insurance often runs somewhere between 1% and 4% of your total construction budget. A larger or more complex build will land on the higher end of that range.
What Affects Your Premium
Several factors shape what you will pay for a builders risk policy. The biggest driver is the project value, since the policy is built to cover the full cost to complete the structure. A higher project value naturally means a higher premium.
Location matters too, and coastal North Carolina projects may see higher premiums tied to wind and storm exposure. Your construction type, materials, and the length of the project all factor in as well.
Adding endorsements, like coverage for soft costs or debris removal, will raise the price somewhat. That tradeoff is often worth it when those expenses could otherwise blow past your budget.
Getting the Right Coverage for Your Project
Every build is different, so adequate coverage looks different from one project to the next. A small renovation has very different needs than a large new construction job.
The right approach starts with sharing your project details honestly. Things like construction type, location, and project value all shape what your coverage should include.
Good risk management means matching the policy to the actual risks your site faces. Coastal North Carolina projects, for example, may need a closer look at wind and storm exposure.
Working with an independent agent gives you options across many insurance companies rather than a single quote. That access helps you avoid higher premiums for coverage that does not quite fit.
At April Jones Insurance, we walk you through the whole process and compare dozens of carriers to find the right fit for you. Whether you are a property owner, a general contractor, or somewhere in between, we will help you build the right coverage. Reach out for a quote.
Homeowners Also Ask These Questions About Builders Risk
Is builders risk insurance the same as homeowners insurance?
No, they serve different purposes. Homeowners insurance protects a finished, lived in home, while builders risk insurance protects a structure during construction or a major renovation project.
If you are building or significantly remodeling, you generally need both at different stages. Your homeowners policy takes over once the construction insurance has done its job.
How long does a builders risk policy last?
Most policies are written for the length of the construction project, often six to twelve months. Coverage typically ends at policy expiration or when the completed building is ready for use.
If your timeline stretches, you can usually extend the policy. Reach out to your insurance agent before the original term ends to keep coverage continuous.
Who pays for builders risk insurance?
It depends on your construction agreement. The cost can fall to the project owner, the general contractor, or be shared, so check your construction contract for the details.
Whoever has the strongest financial stake usually carries the policy. An insurance agent can help you sort out who should be the named insured.
Does builders risk insurance cover theft and vandalism?
Most policies do cover theft and vandalism at the construction site, including stolen building materials, but you need to be sure before you buy the policy. This is one of the most valuable parts of the coverage, since job sites are common targets.
Some policies also address employee theft as additional coverage. Always confirm the specifics, since terms vary between insurance companies.
What does builders risk insurance not cover?
It generally does not cover the tools and equipment owned by workers, or normal wear and tear. It also typically excludes a separate liability policy, which protects against injuries and property damage to others.
Coverage for things like earthquakes or flooding may require additional coverage. Your agent can flag any coverage gaps before your project starts.